Southwest effect

Southwest Airlines

Southwest Airlines was originally incorporated to serve three cities in Texas as Air Southwest on March 15, 1967, by Rollin King and Herb Kelleher. According to frequently-cited story, King described the concept to Kelleher over dinner by drawing on a paper napkin a triangle symbolizing the routes (Dallas, Houston, San Antonio).

The key concept to the Southwest Effect is that when a low-fare carrier (or any aggressive and innovative company) enters a market, the market itself changes, and usually grows dramatically. For example, when fares drop by 50% from their historical averages, the number of new customers in that market may not just double, but actually quadruple, or more.